The recent central bank buying spree looks set to continue. It was reported that Russia’s central bank purchased another 300,000 ounces of gold in July after topping the $100 billion reserve level the month before.
The latest figures reportedly show Russia’s gold reserves now stand at nearly 20 percent of its total reserves. The nation has purchased nearly 3.5 million ounces so far this year and has been a consistent buyer on a monthly basis. Russia’s gold reserves have now increased nearly 10-fold over the last decade, and the country could continue to be a major purchaser of the yellow metal in the years ahead.
The trend towards gold for central banks is nothing new, as these monster financial institutions bought up some 651.5 tons of the yellow metal last year, the highest amount in nearly five decades.
The central bank buying spree may also be sending markets a very clear signal about how they view global economic conditions. As conditions tighten further, central banks may feel increasingly uneasy about the economy and could look to add additional gold holdings to their reserves as a way of boosting portfolio diversification and stability.
Of course, the trend away from the dollar as the global reserve currency of choice is also likely playing a role. It’s no secret that several nations have already begun to diversify away from the dollar, adding other currencies to their reserves and even setting up swap lines to facilitate transactions. The trend away from the dollar is likely to continue, and the currency could eventually find itself playing second fiddle to another leading currency or basket of currencies.
Central banks are still the most powerful financial institutions on the planet.
These behemoths see the importance and value of gold ownership. Shouldn’t you?
As the global economy approaches the next major recession and as the current bull market in stocks nears its conclusion, it may be more important than ever to add diversity and stability to a portfolio. As the next major global recession tightens its grip, central banks may have no choice but to once again start flooding the system with liquidity in the form of ultra-low rates and QE. Such a scenario may keep stocks from falling completely through the floor but will come at a cost of rising debt and lower currency values. As risk asset prices and currency values start to decline, there will be few places to hide. Gold could represent a bright beacon in a
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